December 9, 2022, ©. Leeham News: This is a summary of the article Part 49P, eVTOL production costs. It discusses the production costs of our typical eVTOL (Figure 1) and its drain on the OEM’s finances.
New aircraft projects chronically underestimate the production cost of their certified products. One factor is the effect of the learning curves on the cost items.
During the design of the eVTOL and the handmade production of the prototypes, a team is busy setting up the serial production.
The initial production of a new aeronautical vehicle is several times more costly than the mature product. One expects to reach a mature level of costs from number 500 onwards. The extra cost, called the learning curve cost, causes significant losses from initial production.
A public example of this effect is the accrued production cost losses of the Boeing 787, which was publicized in each quarterly result statement as the project used program accounting.
For an aircraft with a mature production cost of around $100m, the accrued losses up to unit 400 were $30bn. Then the accrued losses were slowly brought down by new sales of aircraft.
An eVTOL project has the same cost problems as the larger 787 project. It means that the accrued cost for the project after development will more than double before the project earns money on the sales of products. It typically happens after 400 units have been produced.
Where this occurs depends on how aggressive the initial customer pricing has been in the project. Inexperienced serial price costing teams seldom estimate the production costs to the correct level. Unless investors have very deep pockets, the ensuing cost crunch results in the bankruptcy of the OEM.
The number of new air vehicle startups that have gone bankrupt during initial serial production counts in the hundreds since the 1950s.
A typical example is the Eclipse Personal Jet project. The Eclipse should be produced in high numbers at low cost by using automotive production practices. There is a limit to how such practices can be used as all design, certification, and production activities have to comply with aeronautical standards from regulators like FAA.
The effect was the contracted sales prices were far below the production cost of the Eclipse, and the company halted production at unit no. 266. It went bankrupt a few months later.